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Gamuda in 2nd Vietnam property venture

11 Mar
VNREGamuda BHD is proposing to acquire a 60% stake in Vietnam-based property developer Sai Gon Thuong Tin Tan Thang Investment Real Estate Joint Stock Company (Tan Thang) for US$82.8 million (RM274.9 million) cash.


In a statement on March 10, Gamuda said Tan Thang held the rights for the investment and development of an 825,216.5-sq metre parcel of land for the “Tan Thang residential, sports and educational complex at Son Ky Ward” in Ho Chi Minh City’s Tan Phu district.

The expected gross development value (GDV) of the project is RM6 billion, with the residential portion comprising medium-end and premium apartments. The first sales launch is targeted for the second half of the year and last for the next seven years.

“The project will enable Gamuda to strengthen its position in the property development industry in Vietnam,” said Gamuda of the rationale for the stake acquisition.

Its wholly owned subsidiary Gamuda Land (HCMC) Sdn Bhd on March 10 entered into a share sale agreement with Sai Gon Thuong Tin Real Estate Joint Stock Company (Sacomreal) for the 60% stake in Tan Thang.

Upon completion of the deal, Gamuda Land will hold 60% of Tan Thang, Sacomreal 30% while the remaining 10% will be held by Vietnamese individual Chau Kim Yen.

According to the announcement, Sacomreal was previously involved in providing real estate services, but had branched into developing and marketing high quality apartments. Among its projects are the Sao Mai Deluxe Apartment Building and The EverRich Business Centre, Apartment and Complex.

Gamuda Land will fund the acquisition via a shareholders’ advance from Gamuda using internal funds and bank borrowings.

This represents Gamuda’s second foray into Vietnam as a property developer. Currently, Gamuda’s presence in Vietnam is in Yen So Park in Hanoi.

According to reports, Gamuda is due to launch that project in June this year and analysts have put its potential GDV at US$12 billion.

“The first residential phase will comprise about 1,200 apartments and 1,000 landed units, with 300 units to be launched this year at around US$1,000 per sq metre (GDV of about RM100 million).

“Management is also in advanced negotiations to bring in reputable partners for its commercial developments,” said Maybank Investment Bank Research in a report on March 10.

Maybank is positive on Yen So Park despite investors’ bearish perception on Vietnam’s prospects due to poor macro fundamentals.

“Our recent visit to the country suggests that local sentiment is significantly more optimistic, particularly on property. We believe higher interest rates are unlikely to significantly dampen demand, as over 80% of residential property purchases are transacted without any bank financing,” said Maybank.

Maybank’s optimism on Yen So Park is based on the less competitive property market in Hanoi relative to Ho Chi Minh City.

Going forward, the research house opined that there could be a potential secular shift in Gamuda’s earnings profile.

“Longer term, Gamuda could become a proxy to Vietnam as the proportion of its Vietnam-derived earnings increases,” said Maybank.

The research house also said while Gamuda was evaluating further opportunities in Vietnam, with the country’s twin deficits and impact of the dong, investors could be neutral on any incremental investment.

Maybank has a buy on Gamuda with a target price of RM3.80. Gamuda closed unchanged at RM2.79 on March 10, with 8.8 million shares traded.

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